12 July 2011

The Value Of Ethics

Contrary to what many may believe, business success is about much more than the bottom line.

Increasingly, organisations are realising that producing tangible social benefits for the wider community is also crucial to corporate survival. It’s all a far cry from the argument of 1970s rightwing economist Milton Friedman, who famously stated that companies didn’t owe society anything and were only in operation to maximise shareholder returns. He felt that if shareholders wished, they could subsequently direct their own windfalls to charities or philanthropic causes. I don’t think that particular argument holds – then or now.

Indeed, the benefits of striving for both corporate and societal gain - something referred to as creating shared value - are significant. For starters, modern consumers take corporate behavior into account when making purchasing decisions. As such, meeting expectations around issues like the environment and animal rights can provide the competitive edge required for success and growth. The ability to attract and retain employee talent is also strongly linked with perceived social responsibility. More and more, young job seekers are caring about issues and broader society and want to work for organisations they’re proud to work with. They want to link up with organisations whose values are aligned with theirs. With career decisions made based on perceptions of how ethically responsible an organisation is, businesses are increasingly looking to align their brand with good causes and practices.

While the ideals of corporate-social responsibility versus business profitability are often presented as diametrically opposed propositions, it certainly doesn’t have to be the case. Both can be achieved simultaneously. Businesses can improve profitability while also delivering a wider social benefit. The real challenge for modern managers is to create this shared value, thus combining shareholder interests with the need to make a powerful community contribution.

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